INDIA NEWS
Investments may not revive in the
near future. Savings by individuals & investments by companies have not
been picking up. The relatively high savings rate which prevailed in the
country prior to the 2008 crisis supported the investments; the same is
faltering thanks to squeeze on margins of corporate; the inflation is driving
individuals to other means of investments like Gold & real estate. The RBI
cut, in July, the economic growth estimate to 6.5 % (from 7.3%) and raised its
inflation forecast to 7 % (from 6.5%). The inflation, according to the central bank,
should be around 5%. Many, however, feel
that a cut in the interest rates can give a boost to the economic activity.
The Indian economy posted a 5.5%
annual growth during the first quarter of the current fiscal (Q1 FY13), beating
the estimates of most analysts (at 5%). After four consecutive quarters of
decline, the latest GDP growth rate would indicate a bottoming-out effect with the worst behind. However issues such as
slow growth in fixed assets, lower growth (compared to previous two quarters)
in top line of companies in the S&P CNX 500 etc. are matters of concern.
The real estate and construction sectors have contributed in a significant way
to the current quarter’s growth; the growth in the sectors may be attributed to
two key reasons- execution of delayed projects & funneling of investment
into real estate which is considered a safe investment in times of economic
crisis. The industry & business
continue clamoring for fast-tracking reforms, cutting policy rates &
implementing second phase of spending; providing impetus for investment &
consumption demand.
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